Bellevue Entrepreneur Switzerland (CH)

Swiss small and mid caps as measured by the SPIEX Index returned 6.2% in May strongly outperforming large caps (SPI +2.3%, SMI +1.3%). Markets started the month on a strong note, boosted by easing US-China trade tensions and solid US economic data. The rally somewhat lost steam mid-May with Moody’s downgrade of the US credit rating to Aa1 highlighting concerns over the level of deficit exceeding 6% of GDP. US long-term yields rose, with the 30-year yield up 25 bps in the month. The Flash Eurozone Composite PMI fell to 49.5 in May from 50.4, impacted by a reduction in services activity (48.9). Encouragingly, the manufacturing component rose for a 5th month in a row, to 49.4, the weakest pace of contraction since 2022. In Switzerland, the procure.ch Manufacturing PMI fell to 42.1 in May, down from 45.8, marking its lowest level since December 2023 on the back of US tariff policies uncertainty. From a market sector perspective consumer discretionary (+9.2%), consumer staples (+8.3%) and healthcare (+4.4%) performed best while real estate (+0.8%), materials (+4.3%) and communication services (+4.6%) lagged the most.

Against this backdrop, the fund rose 7.8%, 158 bps better than the SPIEX benchmark. Since the beginning of the year, the fund returned 9.9%, 65 bps above the benchmark.

Main detractors in the month were Schindler (-2.8%), Roche (-2.6%) and Landis+Gyr (-2.1%). After a strong ytd performance, things cooled down a bit for Schindler in May. Q1 delivery was strong with both order intake and EBIT above consensus expectation. The outlook remained unchanged as the company is bracing for some headwinds from tariffs, fx, mix and restructuring costs. Roche, despite reaffirming its growth outlook at its annual Diagnostic Day, was modestly impacted by growing concerns over US drug pricing following President Trump’s Most Favored Nation Executive Order. The latter remains a persistent overhang across the pharma sector. Landis+Gyr released FY24 numbers with sales and EBITDA mostly in line with the February profit warning. The 2025 outlook was a tad conservative – aiming for an EBITDA growth of 22% - notably in light of the 34% increase in the order intake and the book-to-bill well over 1.5x. The committed backlog rose to USD 4.6 bn, more than 2.5 years’ worth of sales in the pipeline, the most it has ever been. At 8.5x EBIT, the stock is currently trading close to time lows.

Main contributors in the month were SoftwareOne (+37.8%), Swissquote (+17.9%) and Sandoz (+16.6%). SoftwareOne was underpinned by the confirmation of the Crayon take over, an operation in cash and shares that should improve the group’s business mix by increasing its exposure to cloud. The generated synergies should represent 30% of the combined EBITDA. At current share price, the combined entity would be trading on 7x 2025 EBIT pre synergies, suggesting a highly positive risk/reward. Swissquote has risen 28% since the April 2 US tariff announcements. A beneficiary of strong crypto markets and higher trading activity, the stock is insulated from the volatility of the tariff narrative. Despite publishing Q1 results below expectations, with sales missing by 2% on the back of weaker biosimilars, Sandoz shares rerated in May. FY guidance was maintained helped by H2 launches.

Despite all insecurities around tariffs, GDP growth, taxes and currencies, Swiss small and mid caps have started outperforming since mid March 2025, catching up after three years of underperformance. We believe there is more to go. Despite the ytd return of 12%, the SPIEX has only returned 3.8% p.a. since mid-2022, versus an average of 7.4% p.a. during the last decade. Valuations are attractive by historical standards, and business models are often more niche, less prone to US tariff insecurities. The Bellevue Entrepreneur Switzerland continues to focus on undervalued companies with a strong moat and solid balance sheets. The fund is agnostic to style and well diversified across industries, local champions and global niche players.